AYABONGA CAWE: Are central bankers dragging world back to ‘Volcker shock’ era?
As in the 1980s, the pursuit of a credible inflation management framework heightens the risk of mass joblessness and a global recession
Are we back to the era of the “Volcker shock”? This is the question being asked by people worldwide as the pursuit of a credible inflation management framework heightens the risk of mass unemployment and a global recession.
Named after former Federal Reserve chair Paul Volcker, “The Shock” is a reference to the rapid rise in lending rates and seven quarters of negative growth that followed in the US economy between 1981 and 1982. It was a shock that not only caused thousands of manufacturing jobs to be lost, but according to University of Chicago economic historian Jonathan Levy “induced a recession [that] purged all sorts of unprofitable fixed capital and shifted capital investment into financial forms”...
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